The IRS is cracking down on tax fraud to help victims of identity theft avoid having their tax refunds stolen. In 2016, the number of people claiming they were victims of identity theft to the IRS dropped by over 50 percent, and the IRS stopped almost 800,000 fake returns claiming about $4 billion of refunds. But, almost $240 million in fraudulent returns were still paid out. So, even when you’re filing your 2017 tax return, tax fraud still happens, and if it happens to you, follow these steps to report the tax fraud to the IRS.
How to Report Tax Fraud to the IRS
You might not find out about the scam until your e-filed return is rejected or the IRS notifies you that you already filed a return or that it suspects foul play. If this happens to you, you can do a few things to rectify the situation. Here are the steps you need to take to report tax fraud:
1. Respond Immediately to the IRS
No one wants to be the victim of tax fraud so it’s important to be aware of signs that your identity has been stolen. Signs include multiple tax returns filed using your Social Security number, receiving a note that you owe additional taxes, a refund offset, or have had collection actions taken against you for a year that you didn’t do any tax preparation, or IRS records indicating that you earned income from a company that you didn’t work for.
If the IRS sends you a letter about a suspicious return for your Social Security number, call the IRS at the number listed in the letter. If the letter instructs you to go to the ID verification site, visit IDVerify.IRS.gov and follow the steps outlined there.
Don’t respond to any emails, texts or phone calls that claim to be from the IRS. It’s against the agency’s policy to initiate contact with taxpayers by email, text message or social media channels to request personal or financial information. Should the IRS need to contact you, they would do so by mail.
If you receive fake IRS emails or spot a sketchy website, notify the IRS by email at firstname.lastname@example.org. If you suspect you’ve received a possible phishing scam by phone, fax or mail, call 800-366-4484. Report IRS impersonation scams to TIGTA using their online form.
2. Complete IRS Form 14039, Identity Theft Affidavit
Complete the printable IRS Form 14039, Identity Theft Affidavit. This is the key action you must take to report tax fraud; by submitting the completed form, you notify the IRS that it needs to mark your account to identify questionable activity.
Along with the form, you’ll need to provide the following information:
- Your contact information
- An explanation of the issue explaining how you found out about it
- A list of important dates related to the identity theft
- A copy of some form of legal identification, such as your Social Security card, driver’s license or passport
3. File Your Tax Return and IRS Form 14039
Print your completed Form 14039, Identity Theft Affidavit. Attach it to your tax return and calculate and pay any taxes you owe — or at least make an installment payment if you can’t afford to pay your taxes in full. Include a photocopy of a qualifying document to verify your identity. Follow the instructions on the bottom of the form to file your affidavit and send it by mail or fax.
Keep copies of anything you send to the IRS. You should receive a letter from the IRS confirming it received your Identity Theft Affidavit and tax return.
4. Cooperate with the IRS Investigation
After you submit your forms and tax return, you will receive an acknowledgment letter and your case will be assigned to the Identity Theft Victim Assistance organization, which has employees with specialized training to help you. Most cases are reviewed and resolved within 120 days, but some complex cases might take 180 days or more.
If the IRS has not been able to resolve, contact the Taxpayer Advocate Service, a division within the IRS to provide you with tax help. Contact your local Taxpayer Advocate Service office to speak with someone about the kind of tax-related problems you need help with.
5. Contact Your State Tax Authority
You should also inform your state tax agency to determine if there are any additional steps you need to take to protect yourself at the state level. For example, in Kansas, you must submit a copy of your Form 14039 with your paper tax return. The state of Massachusetts, however, has its own Identity Theft Affidavit to complete and submit.
Be prepared to explain how you became aware of the fraud issue, and provide information, such as your:
- Name and address
- Marital status
- Supporting documents
- Asset information
How to Prevent Identity Theft
If criminals have enough information to file a fraudulent tax return, that might not be the only way they are taking advantage of you. If you become a victim, understanding how to prevent identity theft will help safeguard you and your private information going forward.
In addition to reporting your tax fraud situation to the IRS, the IRS suggests you notify other authorities and businesses of your identity theft. The Federal Trade Commission at recommends that you file an online complaint at identitytheft.gov. In addition, you are recommended to put a fraud alert on your credit reports with each of the three major credit bureaus: Experian, Equifax, and TransUnion. The IRS also recommends that you contact your banks and other financial institutions and close any accounts that have fraudulently been opened in your name. You can request a free copy of your credit report at annualcreditreport.com to see if any other accounts have been opened.
Report Tax Evasion and Other Types of Tax Fraud
Identity theft isn’t the only type of tax fraud. The IRS also warns Americans to be on the lookout for individuals or businesses that don’t report income, give kickbacks or use false or altered documents, or claim fake exemptions or deductions, or are guilty of tax evasion.
If you suspect or know of tax fraud, you can report a scam using Form 3949-A. You can obtain a copy of the form by calling the IRS Fraud Hotline at 800-829-0433, but the IRS will not listen to allegations over the phone nor can you report tax fraud online at the IRS website.
You can also send a letter that includes the following information:
- The name and address of the person or business
- The person’s Social Security number or employer identification number
- A description of the fraud
- How you became aware of the information
- The years in which the fraud occurred
- The amount of unreported income
- Optionally, your name, address and phone number
If you report tax evasion, you could qualify for a reward from the IRS Whistleblower Office. However, the amount at stake has to be substantial — more than $2 million for businesses and annual income over $200,000 for individuals. If you have credible and specific information related to tax fraud, you can file IRS Form 211, Application for Award for Original Information, to apply for your reward.